Common Core and Liquidity Auctions

Is it too much of a stretch to claim that American Federation of Teachers President Randi Weingarten and New York Stock Exchange CEO Henry DeCoste share a common concern? Perhaps so, though it does appear that both are worried about the impact of performance metrics on their operating systems.

For instance, as the President of America’s foremost teacher’s union, Ms. Weingarten has protested long and hard against the student testing policies of the Common Core and No Child Left Behind programs. One concern appears to be focused on the harm that can be inflicted on the process of classroom instruction when the instructor “teaches to the test,” thereby diverting learning efforts from critical thinking activities to memorization tasks.

Meanwhile, last week, the NYSE applied for permission to launch a new initiative that addresses a similar premise. Although its adoption of a mid-day stock auction process might seem arcane to laypersons, the motivation behind the initiative is comparable to the concerns of Ms. Weingarten.

You see, investment management strategies have been shifting significantly from value trading to momentum trading activities. In other words, instead of assessing the long term value of firms and then purchasing undervalued equities, investors are increasingly assessing the movement of stock values during a trading day and then rushing through trades at the very end of that day (or at the very start of the following day).

But when large numbers of traders gravitate to such strategies, relatively few trades remain during the mid-day hours. As a result, large volumes of late day momentum trading transactions are based on relatively small volumes of mid-day trading activities, a situation that jeopardizes the stability of the entire financial system.

The NYSE’s solution is to stimulate mid-day trading by holding auctions, a strategy that may yield some incremental improvement. Nevertheless, such auctions do not address the fundamental problem that the widespread adoption of financial market performance metrics is significantly impacting the activity that it is purportedly measuring. And that very situation exists in regards to the Common Core and No Child Left Behind programs as well.

In other professional and academic fields, researchers have known for decades that the presence of investigators can influence the behavior of phenomena. In the 1920s, for instance, business engineers referred to this condition as the Hawthorne Effect. And in the 1960s, sociolinguists called it the Observer’s Paradox.

A similar effect now appears to be wielding an outsized influence today in fields from primary education to the investment industry. Thus, before we respond to metrics of sub-optimal performance by modifying our operating activities, perhaps we should pause to identify the disappointing outcomes that are attributable to the measurement process itself.

New York’s Education Rebellion

Have you ever heard of the Whiskey Rebellion of 1791? It represented the first instance of a sustained anti-government protest in the United States. Although President George Washington employed federal troops to decisively squash that uprising, Americans have continued to stage protests since that time.

Indeed, from the military draft riots of the 1860s to the civil rights movement of the 1960s, and then on to the Tea Party and Occupy Wall Street protests of the 21st century, Americans have continued to rally against their own government’s policies and practices. And today, the ongoing public demonstrations against police brutality extend this established tradition.

Every so often, though, social rebellion tends to erupt in unusual venues. Did any one expect, for instance, the suburban parents of grade school children in New York State to rebel against school testing practices?

The recent governmental emphasis on standardized tests originated in the No Child Left Behind law a decade ago. It then expanded under the recent Common Core initiative. But why are parents in New York now so concerned?

Apparently, the parents believe that an over-emphasis on testing is creating a destructive high pressure, high stakes culture that diverts resources from learning activities and encourages “teaching to the test.” They do have a point; after all, eight grade school educators in the Atlanta school system just received prison sentences for helping students cheat on their standardized exams.

New York is facing a similarly challenging situation because parents in the Empire State can elect to opt out of testing activities. In much the same way that California’s “opt out of pediatric immunizations” policy led to a measles outbreak and a public health crisis, New York’s “opt out of standardized testing” policy is leading to a public education crisis.

That’s because the bedrock foundation of any standardized testing activity is the presumption that the results of the tests are representative of the students in the education system. Once significant numbers of students opt out, an assessment system solely based on testing has no alternative means to gauge their needs.

Imagine, for instance, a restaurant owner who decides to transform his entire menu on the basis of information from a handful of little customer feedback cards. If many of his paying customers decline to hand in their cards, should the owner rely solely on the feedback that he receives from a few patrons?

At the moment, New York State Education officials are both exhorting and threatening parents who wish to opt out of the testing process. Many officials are encouraging parents who have already opted out to change their minds and opt back into the system. But no official has yet launched any initiative to address their complaints.

In a society where teachers risk prison to help students cheat, though, why not directly address the high pressure, high stakes testing culture? After all, if America’s Whiskey Producers, Civil Rights Protestors, Tea Partiers, and Wall Street Occupiers never responded to simple requests to cease their protests, why would the soccer moms of New York State act any differently today?

The Perils Of Measuring, And Rewarding, Performance

It’s important to measure employee performance, isn’t it? By measuring success, and by rewarding it, we can identify superior performers and encourage others to strive for excellence.

Indeed, the logic of this philosophy appears to be self-evident. And yet, in a number of recent cases, measurement and compensation systems appear to have backfired in a dramatic fashion.

Just two days ago, for instance, General Eric Shinseki of the United States Department of Veterans Affairs resigned from his leadership role in the wake of an exploding health care scandal. Apparently, many military veterans have died while waiting for appointments to receive care, although Department employees recorded that they weren’t waiting at all.

And why did those employees falsify their records? Apparently, they knew that the Department did not possess the primary care resources to serve the needs of the veterans. But they also knew that the Department was collecting wait time metrics, and that lower waiting times would be rewarded by higher compensation.

So, lacking the resources to improve the system’s performance, the employees falsified the measurements and collected the compensation. It was a simple, yet effective, scheme.

The case is reminiscent of many other situations in the education sector. Recent laws and programs such as No Child Left Behind and Common Core have heavily emphasized standardized tests. A school with students who produce low scores may lose its funding, and individual teachers who teach low scoring students may be penalized and even publicly shamed.

But public school funding levels have been slashed in the wake of the Great Recession, leaving fewer resources to invest in scholastic activities. So, lacking the means to improve their students’ test scores, many educators have resorted to falsifying those measurements.

An explanation, of course, is not an excuse. There is truly no excuse for falsifying measurements, certainly not with the intention of masking situations where veterans die awaiting care and children fail to receive a satisfactory education.

Nevertheless, when measurements are utilized to determine employee compensation during a period of scarce or inadequate resources, it isn’t difficult to explain why individuals will feel compelled to falsify records. In other words, these recent scandals certainly weren’t unforeseeable events.

How would you establish the right “mix” of performance measurement, compensation, and oversight activities at your organization?

Toddlers Rejoice: No More Admission Exams!

The standardized test industry has recently experienced some rough times in the United States, hasn’t it? The federal Department of Education and various trade associations, for instance, has repeatedly criticized many of the grade school testing requirements of the Bush Administration’s landmark No Child Left Behind law. And critics continue to complain about the inadequacies and failures of college admission examinations.

But did you know that many prestigious grade school, kindergarten, and “pre-k” (i.e. nursery school) programs in the United States also require standardized admission tests? The Association of Boarding Schools and the Education Records Bureau sponsor the Early Childhood Admissions Assessment (ECAA) examination for very young children.

Last week, however, the Independent School Admissions Association of Greater New York announced that some of the Big Apple’s most renowned private schools would no longer require the examination. The reason? Too many parents are spending thousands of dollars on test preparation services for their toddlers, creating “a lot of anxiety in families and kids that is unnecessary.”

The unspoken implication, of course, is that the tests have also become ineffective indicators of natural student ability. After all, examination grades that can be improved by expensive test preparation services inevitably discriminate against individuals who cannot afford to purchase such services.

One can only wonder whether other industry sectors will face similar concerns as well. For instance, if the newly emerging universal health care program in the United States is unable to rely on purportedly unbiased measurements of medical efficacy, it will struggle to serve the needs of the American people.

At the moment, though, America’s toddlers aren’t worried about universal health care. They are merely breathing sighs of relief about escaping their first experiences with school admission tests!

Moneyball Goes To Grade School!

Fans of the American sport of baseball enjoyed an unusual “double header” of activities this weekend. In addition to watching the annual ritual of spring training play out in Arizona and Florida, they also rooted for the baseball film Moneyball during Sunday evening’s Academy Awards telecast.

The film was nominated in three major categories: Best Picture, Best Actor in a Leading Role (Brad Pitt), and Best Actor in a Supporting Role (Jonah Hill).  Brad Pitt himself was a producer on the film; he took a “leading role” (so to speak) in securing the required financing of the entire project.

The film itself was based on a best selling book that described how the Oakland Athletics employed advanced statistical methods to assess available ball players. Using such methods, they were able to select and promote the very best players in their own organization, and to identify and trade for the finest talent in other organizations.

In a sense, the Moneyball approach to rating ball players with statistical measurements is similar to the process that grade schools and college programs use to rank their students. Last week, however, the City of New York turned its ranking system on its head by publicizing the evaluation grades of its own teachers.

Baseball vs. Biology

In the film Moneyball, Brad Pitt struggles to convince his coterie of senior talent scouts that qualitative baseball skills can defined and measured in a manner that produces reliable ratings. His scouts, however, stubbornly cling to the traditional belief that talent and ability are innate traits and thus cannot be measured and compared quantitatively.

Until recently, most grade school administrators clung to similar beliefs about their own teachers. After all, they argued, how can we measure the effectiveness of ninth grade biology teachers if we are asking them to inspire their students to become doctors, nurses, and medical researchers many years later? In other words, how can we possibly expect to measure inspirational qualities that will necessarily take many years to generate any results?

If we define the primary role of teachers, though, in a narrow manner as the “teacher of facts” to students, then we can utilize standardized tests to measure effectiveness. That’s the approach that the City of New York utilized to compile its teacher rankings; nevertheless, many critics are now identifying problems with the City’s compilation process.

A Pair Of Problems

One set of problems appears to involve concerns about public disclosure. Unlike most organizations, which generally treat performance evaluations as private and confidential documents, the City of New York dumped its entire set of ratings onto public web pages. Many now criticize the City for publicly humiliating teachers with “incomplete, misleading, and often wrong” ratings.

A second set of problems appears to involve concerns about the validity of the ratings themselves. They appear to have been calculated with an extremely high confidence internal, which is a statistical term that refers to a measurement’s inherent margin of error.

Imagine that you are a teacher who has become comfortable teaching an introductory biology course in a wealthy community where parents routinely hire (at their own expense) private tutors to help their children “ace” their exams. Faced with such a rating system, would you ever agree to teach an advanced biology course in a poor community where children live in single parent households with no financial resources?

Teaching To The Test

Ironically, New York City’s decision comes at a time when the federal Department of Education is dismantling its national No Child Left Behind program. One of the most significant complaints about that program (and about New York City’s testing process as well) targets its high level of reliance on standardized student tests, a process that may compel teachers to focus on “teaching to the test” by emphasizing rote memorization activities over critical thinking assignments.

In fact, very shortly before New York City published its teacher rankings on the internet, Bill Gates authored a lengthy and impassioned editorial in the New York Times to ask that the City refrain from doing so. His request was a highly noteworthy one, considering the role that the Gates Foundation has played in developing advanced (and highly successful) methods to modernize our primary education systems in the United States and overseas.

He titled his editorial Shame Is Not The Solution, noting that New York’s “value added” method of rating teachers on the basis of their “impact on students’ test scores” is a “big mistake.” Although today’s professional baseball executives use statistics like Wins Above Replacement to evaluate talent, Gates claimed that the same concept cannot be applied to public school teachers.

Of course, that’s exactly the objection that Brad Pitt’s character faced in the film Moneyball. In New York City, though, the fate of a baseball team is not at stake. Instead, the future of generations of students hangs in the balance.

Arizona’s Obesity Fee: Can It Save Medicaid?

Airlines, in their constant search for new revenue sources, have successfully introduced a wide variety of new fees. A snack, for instance, will now cost you $3 or more on American Airlines. And United will now charge you $25 to check your first bag.

Municipalities, starved for cash, have jumped on the nickel-and-diming bandwagon as well. A participant in a traffic accident in Toledo, Ohio, for instance, will now pay several hundred dollars for a “crash tax” to fund emergency services. And Mayor Michael Bloomberg of New York City recently proposed a similar fee for residents and visitors involved in automobile crashes, regardless of fault.

But a fee for being obese? That’s the latest idea that Governor Jan Brewer has proposed for reinventing the Medicaid system in Arizona. Once each year, under her proposal, physicians would report the names of obese patients to the state; each patient would then receive a penalty invoice of $50.

Can this proposal actually work? How would it change the current system?

The Conundrum of Measurement

One challenge that would be confronted while implementing this policy, of course, involves the need to reach an agreement on the definition of obesity. Most physicians utilize the Body Mass Index (BMI) formula to establish obesity; according to the National Institutes of Health, for instance, a six foot tall man or woman would be considered obese at a body weight of 221 pounds.

The problem with this approach, however, is that it is often misleading to establish a target “healthy weight” on the basis of physical height alone, even though height is the sole criterion that is utilized by the BMI formula. Under such an approach, a large majority of all of the players in the National Football League — a physically fit bunch, indeed! — would be declared obese.

Various private self-help services use waist, hip, and neck sizes to estimate body fat composition percentages. But these are all merely estimates, not the type of precise measurements on which it may be appropriate to base government fees of any kind.

Nevertheless, even if the measurement conundrum is settled, a second question must be considered: how would an obesity fee impact the current system?

Gaming The System

An impact analysis is important because any measurement based reimbursement or fee policy is vulnerable to exploitation and manipulation by individuals who seek to “game” the system. Public education’s No Child Left Behind system, for instance, has been plagued by teachers who “teach to the test,” as well as by schools that simply expel low scoring students.

Similarly, an annual obesity fee based on an annual weight measurement may compel consumers to seek out unhealthy “fad” diets solely to pass an annual weight test. And after each test, such consumers may (as is often the case with “fad” diet followers) go on eating binges, creating drastic weight fluctuations that can actually exacerbate conditions like diabetes.

Furthermore, would physicians shy away from accepting obese consumers of any kind out of concern that they might themselves be confronted with obesity penalty fees as well? And would physicians feel comfortable “snitching” on their patients if they are required to report the obese individuals to the government? Even the slender and fit among us may not want our personal physicians to function as “weight police” for state bureaucrats!

National standards of health care quality, such as the National Committee on Quality Assurance’s HEDIS standards, do indeed define and measure performance measurements regarding weight counseling services that are financed by health insurers and delivered by medical providers to obese and overweight consumers. But a penalty-based system that relies on physicians for reporting purposes is far different than an incentive-based system that emphasizes provider education.

A Question of Human Behavior

Ultimately, of course, there are two reasons why any governmental entity may choose to institute penalty fees on any individual. One, quite simply, is to raise revenues. And two, perhaps with more subtlety, is to attempt to modify human behavior.

It is hard to imagine a more awkward method for raising state revenues than to convert physicians into “weight police” who report obese consumers to government officials. Indeed, Governor Brewer has not emphasized this element of her policy; instead, she has chosen to defend her proposal as an incentive system for encouraging Medicaid patients to “take greater control of their health.”

But will people who are behaviorally inclined to snack on chocolate and pizza be incentivized to climb on a treadmill in February out of concern that they might be charged $50 in December? How many among us — even the most physically fit of us — actually maintain our New Year’s resolutions to lose a few pounds as time progresses beyond the second week of January?

The potential success of this plan may simply come down to a question of human behavior. Unfortunately, though, it was our behavioral failings that led to the very rise of obesity in the first place.